Philadelphia Fed Chairman Huck stated on Friday that he believes the Federal Reserve can stop raising interest rates as price pressures continue to weaken.
Huck declared on the same day, "I believe we can maintain interest rates at the current level. We have done a lot of work (raising interest rates) and we are doing it quickly
Huck has voting rights in the Federal Open Market Committee (FOMC) this year, and his words carry extra weight as policymakers consider the next steps. Although his latest statement is consistent with the recent statements of several other officials, it may be the clearest support so far for suspending interest rate hikes.
Since March 2022, the Federal Reserve has raised benchmark interest rates 11 times, totaling 525 basis points. Last month, the Federal Reserve chose to remain silent because officials were divided on the direction of inflation.
Recently, several officials of the Federal Reserve said that the tightening of the financial environment caused by the soaring yield of US treasury bond bonds will help the Federal Reserve slow down economic growth and curb inflation. Boston Fed Chairman Susan Collins stated on Thursday that if the recent upward trend in US bond yields continues, it may reduce the need for further interest rate hikes by the Federal Reserve.
However, Huck did not rely on market trends, but stated that the Federal Reserve had only made substantial progress in lowering prices, without causing a surge in unemployment or otherwise dragging down the economy. He said that the Federal Reserve can now observe the impact of interest rate hikes and use the upcoming data as a guide for policy direction.
He said, "Keeping interest rates stable will allow monetary policy to work. I am confident that the federal funds rate is now restrictive, and as long as interest rates remain unchanged, we will steadily lower inflation and make the market more balanced. It may seem like we have done nothing, but in reality we have done a lot, and the full impact of interest rate hikes will take some time to be felt
The previous day, a US inflation report showed that the recent decline in inflation in the United States had come to a halt in September, indicating that winning the war against inflation completely still requires some twists and turns. The good news is that compared to the 40 year high set last year, price increases have significantly slowed down, especially the core inflation indicator that measures the basic inflation situation, which does not include volatile food and energy prices.
And Huck said he will not be swayed by a month of data, pointing out that the monthly increase in PCE data favored by the Federal Reserve in August was the smallest since 2020.
He claimed, "We will not tolerate another accelerated rise in prices, but I do not want to overreact to normal monthly price fluctuations. We still rely on data, but we will remain patient and cautious with the data
Huck pointed out that the Federal Reserve remains vigilant against various risks, from the banking crisis earlier this year to rising credit card balances and labor disputes. But he said that the overall economy remains stable, and he believes that as more people enter the labor market and the issue of labor market imbalances will be resolved on their own, the unemployment rate will only slightly increase at most.
Nevertheless, he did not provide any signal that the Federal Reserve would soon cut interest rates, and even emphasized that if inflation rebounded, he would not hesitate to support further rate hikes.